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A leading bond-rating agency has downgraded the Chicago Board of Education's debt in the wake of the settlement of the Chicago Teacher's Union's recent strike.

Moody's Investor Service had already downgraded the Chicago Public Schools' bond rating outlook to "negative" from stable in July, and cited Thursday the rating agency's "view that the district will be hard-pressed to make the budget adjustments necessary to close an estimated $1 billion budget gap for fiscal 2014."

A ratings downgrade can increase the cost of borrowing for a government agency.

The schools' downgrade to an A2 rating "reflects a weakened financial profile" born of depletion of reserves, a coming jump in pension payments after three years in which state law was changed to reduce the payments temporarily, slow payment of state money--and the recent strike, Moody's said in a release.

"If progress is not made toward improving the financial condition and liquidity of district operating funds, or if challenges arise in making the required pension contributions, the district's general obligation credit quality will be impaired," according to the release.

Strikes by other unions, more delays in state funding or "unmanageable" increases in pension costs could result in further ratings downgrades, Moody's warned.

A spokesperson for Chicago Public Schools wasn't immediately available to comment on the downgrade.